Nordstrom latest U.S. store headed to Canada

Commentary: With U.S. economy in the doldrums, another U.S. chain looks north

By

BillMann

PORT TOWNSEND, Wash. (MarketWatch) — There will soon be one less reason for Canadians to go shopping in the U.S. Now, if only Nordstrom sold milk....

The upscale department-store chain is set to announce in Toronto on Thursday that it’s opening four stores north of the U.S. border, most likely in Vancouver, Calgary, Toronto and Ottawa.

Nordstrom
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has long been interested in Canada. Maybe it’s noticed recent headlines about another Seattle-based company, Costco
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and its success in filling its stores with strong-loonie-wielding, milk-craving Canadian shoppers.

Nordstrom is following a path taken by other U.S. retailers lately. J. Crew began opening stores in Canada last year, and Target
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will open at least 125 outlets in Canada starting in March. There are also reports that Bloomingdale’s is interested in expanding north, as well as other U.S. apparel chains.

Not only are Canadians flush with the strong Canadian dollar, which is trading above the greenback at its highest level in over a year, but Canuck shoppers have shown a lack of restraint with their credit cards lately, running up record household debt, a trend being actively discouraged by Bank of Canada governor Mark Carney.

Nordstrom currently has 234 U.S. stores, including 113 Nordstrom Rack sites.

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Typewriters, spoons and chairs have all been employed by a young Greek designer to wow the world with her print dresses.

The Canadian Nordstrom stores will open in malls operated by Canadian-based shopping-mall developer Cadillac Fairview. Thursday’s announcement comes after months of speculation that began when Cadillac-Fairview paid Sears Canada C$170-million to vacate leases at premier shopping centers in Ottawa, Calgary and Vancouver. Sears
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will be targeting more suburban outlets in Canadian cities.

Nordstrom will be going head-to-head with a Canadian institution, The Bay, whose owner, the Hudson Bay Company, is North America’s oldest company. There are large Bay stores in all major Canadian cities, 91 in all across Canada. But the Bay’s image is far more staid than Nordstrom’s.

Industry analyst Dan Geiman follows Nordstrom at McAdams Wright Ragen in Seattle, and says that until the current economic slowdown, the big Seattle upscale chain saw quite a bit of opportunity in the U.S. “Malls were still being built, and shoppers were continuing to shop.”

But with the flagging economy and high unemployment, “that’s kind of shut down at this point,” he said, adding that expanding into Canada is a way for Nordstrom to keep growing despite the headwinds. There have been reports for some time that much of the U.S. retail market is saturated with chains, who are now looking to expand elsewhere.

Expansion works both ways: Canada’s largest restaurant chain, Tim Hortons, has outlets in the U.S. and has recently opened stores in the Middle East.

Canadian retail analyst John Torella told the Toronto Star that while Nordstrom won’t have U.S. prices in Canada — few chains do — it’s unlikely to make the same mistake J. Crew made when it opened its Canadian stores: Selling merchandise at noticeably higher prices. That caused a consumer backlash.

“I think all the American stores have studied the market. They will be competitive within their segment. They won’t bring U.S. prices. They’ve all learned that lesson from J. Crew.”

The higher Canadian dollar does, after all, the more it will help ease the pain of higher prices. Well, up to a point, anyway: Canadian milk shoppers have been making headlines recently by mobbing the Costco outlet in the border city of Bellingham, Wash., for milk that costs only about half as much as in Canada. There are plans for Costco to build a second Bellingham store.

It appears that Nordstrom is getting its foot in the door in Canada at a good time. Which makes sense, considering the upscale chain is such a major force in footwear.

Nordstrom has already established a strong e-commerce business in Canada, which gives the retailer a strong customer base in Canada as it enters the market. Analysts predict the first Nordstrom stores in Canada won’t open for a couple of years. And when they do, there’ll be long lines at those doors.

Much of the Canadian media coverage on the retail sector this week had previously been focused on Target.

Target has had a major presence at Montreal’s Fashion Week and at the big Toronto International Film Festival. Target even brought its mascot, a bull terrier named — what else? — Bullseye to the big Toronto filmfest.

One thing Nordstrom shoppers won’t have to worry about is the color of the apparel they wear into the store.

Comic Kevin Nealon, in his new Showtime comedy special, has this warning to big-box shoppers:

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